Consider the constant reminders of their superiority that managers are bombarded with in the course of their daily work. They wear the suits, they have the private offices, they are the ones chosen for promotion, they are more highly educated and paid significantly more than their subordinates, and everyone defers to them. They are the ones in charge. With all of these signals continually reminding them that they are superior to their employees, it is easy for managers to come to believe that they actually are. And such a belief can lead them into some highly dysfunctional behaviors.

One way that managers’ feelings of superiority manifest themselves is in excessive pay disparities and inappropriate perks. More than a century ago, J.P. Morgan observed an interesting pattern in his client companies. Those having excessive pay differences between levels in their hierarchies did not perform as well. Consequently, he would not invest in a company if pay differences from level to level were more than 30 percent. Morgan had put his finger on something important. If differences between levels in a company become too great, its intangible fabric of trust, communication, and respect unravels, which introduces enormous hidden costs. From the point of view of ideas, the ability of managers to listen to those who work for them is greatly reduced, as is the willingness of their subordinates to offer ideas.

We encountered a good example of the detrimental impact of extreme differences between levels on the flow of ideas while helping a European port and logistics company with its idea system. We arrived at the port in a blinding wet snowstorm to find the parking lot full. But directly in front of the headquarters building there was a row of mostly open spaces. Furthermore, these spaces were covered by a blue awning, which extended conveniently all the way to the front entrance. We couldn’t believe our luck—the visitors’ parking was right up front and protected from the weather! We pulled into one of the open spots and began getting out of the car. A well-dressed receptionist bustled out from the lobby and confronted us: “I’m afraid you can’t park there. It’s for top managers only.” We got back in the car, circulated some more, and eventually squeezed into a spot at the back of the lot. We got soaked as we ran into the building.

The right to park under the blue awning turned out to be a jealously guarded top management perk. The company’s headquarters were on the Adriatic coast, near the Italian Alps. In winter, it snowed and rained a lot, and in summer the hot Mediterranean sun baked any car left out in the open. That awning spoke volumes. On a daily basis, it reinforced top managers’ perceptions that they were somehow more worthy than their employees—they should not have to get wet in the winter or climb into swelteringly hot cars in the summer—and it reminded employees of their second-class status.

We had been invited because the company was losing business to more nimble competitors, and top management had set up an idea system hoping to capture employee ideas to cut costs. Unfortunately, very few ideas were coming in and almost none were being implemented. The managing director and his team thought the problem lay somewhere in the mechanics of the idea system, but the real problem turned out to be the gap the management team had created between itself and the workers. The blue awning had been our first indication of this. No matter how much the leaders of this company tweaked their idea process, unless they changed their behavior, they were not going to get much help from their employees in making the company more competitive.

When the perks that arise from management feelings of superiority are out of public view, some of them can be ridiculous. In Riverside, Calif., one such perk revealed much about the attitude of the county executives toward their workers. County policy specified that all bathroom tissue purchased for county government bathrooms must be two-ply. Yet the county supervisor had quietly upgraded the toilet paper used in the bathrooms of the county’s top executives to a more expensive and softer four-ply. A whistleblower “outed” this perk to the press just after the county announced that employees had to take a 10 percent pay cut in response to a budget crisis. After a storm of negative coverage of what the media dubbed “Bathroom Tissue Gate,” the embarrassed officials sheepishly reverted to two-ply.

From reserved parking places to separate bathrooms, the last things managers need are extravagant status symbols that tell them that they are better than the people who work for them. Once they believe that, they can easily believe that they know better, too.

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The Conference Board Review is the quarterly magazine of The Conference Board, the world's preeminent business membership and research organization. Founded in 1976, TCB Review is a magazine of ideas and opinion that raises tough questions about leading-edge issues at the intersection of business and society.